Fitch: Latam Infra Diverging, No Aid to Brazil from Olympics

NEW YORK & BOGOTA, Colombia--(BUSINESS WIRE)-- Brazil's GDP contraction will continue to drive down the performance of most of the country's infrastructure assets through the remainder of 2016, but the performance of transportation assets in Mexico and other Latin American countries should improve, driven by growth in those countries' economies, Fitch Ratings says. Some recovery may be possible for Brazilian infrastructure in 2017 if GDP growth returns.

Although fans, media and athletes have begun to arrive in Brazil for the Olympics, we expect declines in demand for air travel and other transportation assets to remain for the rest of 2016 due to the rise in unemployment and decline in consumer confidence. All six of Brazil's privatized airports continue to negotiate extensions with regulators on payment of concession fees that were due in June and July. That helped prevent a liquidity squeeze but does not change our negative outlook on those airports. For Brazilian transportation assets, we use a 3.8% GDP decline in 2016 for our base and rating cases. We believe a weak economic recovery in 2017 would raise passenger volumes and airport traffic and subtly ease liquidity pressures on Brazil's airports and other infrastructure assets.

Fitch's Negative Rating Outlook on two Panamanian toll roads (ENA Sur and ENA Este) could be revised to Stable should the government raise toll rates and traffic performance increase in the near future. ENA Este opened one year late and has since seen traffic remain at below forecast levels. In our view, the likelihood of ENA Sur's default will substantially increase over the long term if the government does not to raise toll rates in the coming years.

Fitch-rated Mexican, Chilean and Colombian toll roads will likely experience robust traffic volumes for the remainder of 2016. We also expect their performance will benefit from their strategic locations in areas with favorable demographics and their maturity (which means toll revenues are generally more stable).

We expect that transmission lines, gas pipelines, hospitals and other social infrastructure projects throughout Latin American will finish 2016 near their historical performance levels. Fitch views counterparty risk (grantors' obligations and off-takers) that can lead to payment delays or deteriorating credit quality to be one of these projects' main risks. We are also monitoring the creditworthiness of completion guarantors' and the sponsors' abilities to contribute the equity they committed.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Related Research

2016 Midyear Outlook: Latin American Infrastructure (Heightened Differences in Performance)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885581

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Source: Fitch Ratings

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